NOTE 6 – COMMITMENTS, CONTINGENCY AND RELATED PARTIES

Operating Lease Commitments

The Company leases its office, warehouse facilities and retail showrooms under operating lease agreements which expire at various dates through December 2030. Monthly payments related to these leases range from $2,040 to $71,050.

Expected future annual minimum rental payments under these leases follow:

Severance Contingency

The Company has various employment agreements with its senior level executives. A number of these agreements have severance provisions, ranging from 12 to 18 months of salary, in the event those employees are terminated without cause. The total amount of exposure to the Company under these agreements was $3,165,978 at August 2, 2020 if all executives with employment agreements were terminated without cause and the full amount of severance was payable.

Legal Contingency

The Company is involved in various legal proceedings in the ordinary course of business. Management cannot presently predict the outcome of these matters, although management believes, based in part on the advice of counsel, that the ultimate resolution of these matters will not have a materially adverse effect on the Company’s condensed consolidated financial position, results of operations or cash flows.

Related Parties

Our equity sponsor Mistral Capital Management, LLC (“Mistral”) performs management services for the Company under a contractual agreement. Certain of our directors are members and principals of Mistral. Management fees totaled approximately $100,000 and $200,000 for the thirteen and twenty-six weeks ended August 2, 2020 and August 4, 2019, respectively and are included in selling, general and administrative expenses. There were $100,000 and $2,000 amounts payable to Mistral as of August 2, 2020 and February 2, 2020 respectively and are included in accounts payable and accrued liabilities in the accompanying condensed consolidated balance sheets. In addition, the Company reimbursed Mistral for expenses incurred in the amount of $0 and $39,000 for out of pocket expenses for the twenty-six weeks ended August 2, 2020 and August 4, 2019, respectively. There were no such reimbursements during the thirteen weeks ended August 2, 2020 and August 4, 2019, respectively.

Our equity sponsor Satori Capital, LLC (“Satori”) performs management services for the Company under a contractual agreement. One of our directors is a principal of Satori. Management fees totaled approximately $25,000 and $50,000 for the thirteen and twenty-six weeks ended August 2, 2020 and August 4, 2019, respectively, and are included in selling, general and administrative expenses. There were $5,000 amounts payable to Satori as of August 2, 2020 included in accrued liabilities in the accompanying condensed consolidated balance sheets. Amounts payable to Satori as of February 2, 2020 were $95,000 consisting of $25,000 in management fees and $70,000 of reimbursable expenses which were included in accounts payable and accrued liabilities in the accompanying condensed consolidated balance sheets. In addition, the Company reimbursed Satori for expenses incurred in the amount of $36,401 and $0 for out of pocket expenses for the twenty-six weeks ended August 2, 2020 and August 4, 2019, respectively. There were no such reimbursements during the thirteen weeks ended August 2, 2020 and August 4, 2019, respectively.

The Company engaged Blueport Commerce (“Blueport”), a company owned in part by investment vehicles affiliated with Mistral, to convert to the Blueport platform. One of our directors is also a director of Blueport. The Company launched the Blueport platform in February 2018. There were $1,218,278 and $430,335 of fees incurred with Blueport sales transacted through the Blueport platform during the thirteen weeks ended August 2, 2020 and August 4, 2019, respectively, and $1,701,126 and $767,831 during the twenty-six weeks ended August 2, 2020 and August 4, 2019, respectively. Amounts payable to Blueport as of August 2, 2020 and February 2, 2020 were $0 and $150,508, respectively, and are included in accrued expenses in the accompanying condensed consolidated balance sheets.